Your Taxes: Cash Is Not King…
The new law distinguishes between businesses, consumers (referred to as non-businesses) and tourists.
A business is whoever sells an asset or gives a service in the course of its business, including a charity. A transaction is the sale or purchase of an asset or giving of a service or receipt thereof. A tourist is defined as someone on a temporary or visitor’s visa, but not someone on a work permit visa nor a diplomat.
The new law becomes effective on January 1, 2019. Below is a summary.
New cash limits
According to the new law, a business will not be able to give or receive payment in cash for a transaction if the price of the transaction exceeds NIS 11,000.
A consumer will not be able to give or receive payment for a transaction in cash if the price of the transaction exceeds NIS 50,000.
In a business-to-consumer (B2C) transaction, cash may not be paid if the transaction price exceeds NIS 11,000.
In a consumer-to-consumer (C2C) transaction, cash may not be paid if the transaction price exceeds NIS 50,000.
In a business-to-tourist (B2T) transaction, cash may not be paid if the transaction price exceeds NIS 55,000.
A lawyer or accountant may not be used to circumvent these rules. They may not receive cash above the above amounts as part of their business service to their client .
As for salaries, donations or loans, cash may not be paid if their amount exceeds NIS 11,000, except for loans by regulated financial bodies.
Exceptions to the cash limits
The cash limits may not apply to non-salary payments to a family member, namely: spouse, parent, son, daughter, brother or sister or their children, grandson, granddaughter, and spouse of all these, and other dependents “attached to their table”. Governmental bodies may also be let off the cash limits by the Finance Minister and other relevant minister.
No Blank checks
Additional measures aim to stamp out the practice of checks being endorsed and passed down a chain of hands before eventually being banked. All endorsements must be to a named recipient.
Moreover, a business may not give or receive, as part of its business, payment by check for transaction or as salary, donation, loan or gift unless the name of the recipient is stated on a check banked or endorsed.
A consumer may not accept payment by check for a transaction or as salary, donation, loan or gift exceeding NIS 5,000 without his name being stated on a check banked or endorsed. A consumer may not give a check in payment to a business for such things without the name of the business being stated on the check banked or endorsed, nor give such a check exceeding NIS 5,000 for such things to another consumer.
In the case of an infringement, the Tax Director is empowered to impose penalties ranging from 15% to 30% of the cash payment or endorsement to an unnamed person. First the alleged offender must be notified and allowed 45 days after delivery to appeal to the Tax Director. The Tax Director must then notify his final decision, whereupon appeal may be filed at the magistrates’ court within 30 days after delivery. If it happens again within 2 years, the penalty is doubled. Offenses may be published, but not the offender’s name.
As mentioned, these new rules take effect January 1, 2019. It is not yet clear what happens if payment takes place in bitcoins or other virtual currencies. But it is clear these new offenses will strengthen the hand of the Israeli Tax Authority.
The main deterrent may be the ability of tax officials link these offenses to existing tough rules that enable tax officials to disqualify the books of businesses that are deemed inadequate.
In cases of inadequate books, tax officials may estimate the taxable income of the taxpayer to the best of their judgment, which is never good for the taxpayer….
As always, consult experienced tax advisors in each country at an early stage in specific cases.